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Nucor Corp (NUE) Q4 2019 Earnings Call Transcript - Motley Fool

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Nucor Corp (NYSE:NUE)
Q4 2019 Earnings Call
Jan 28, 2020, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Nucor Corporation Fourth Quarter of 2019 Earnings Call. As a reminder, today's call is being recorded. Later, we will conduct a question-and-answer session and instructions will come at that time.

Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward-looking statements, which are based on management's current expectations and information that is currently available. Although Nucor believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy.

More information about the risks and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them, either as a result of new information, future events or otherwise.

Now, for opening remarks and introductions, I would like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon, and thank you for joining us for our fourth quarter earnings call. In my first call, as CEO of Nucor, I'm honored to have the opportunity to lead this company and to serve alongside the 27,000 men and women of Nucor, who inspire me every day. Joining me on the call today are the members of Nucor's executive team, including Jim Frias, our Chief Financial Officer; Craig Feldman, responsible for raw materials and logistics; Ladd Hall, responsible for flat-rolled products; Ray Napolitan, responsible for engineered bar products, as well as Nucor's digital initiatives; MaryEmily Slate, responsible for plate, structural and tubular products; Dave Sumoski, responsible for merchant bar and rebar products; and Chad Utermark, responsible for fabricated construction products.

I also want to thank John Ferriola for his leadership during the past seven years as CEO and the impact he has made over his 28 years with our company. We thank him for his many contributions to Nucor and wish him all the best in his retirement.

At Nucor, our greatest competitive advantage is our culture and the greatest measure of that culture is how we care for one another through the value of safety. 2019 was the safest year in our history and I would like to thank all of my teammates for achieving this tremendous result. Nucor is a continuous improvement company. Our challenge and opportunity is to achieve breakthrough improvements in this core value. Over the last several months, I have engaged our team to ask how we can continue to improve our performance in safety, and we plan to work together with our teammates to implement their ideas and strategies. I look forward to making 2020 an even safer year for Nucor together.

In 2019, Nucor recorded earnings of $4.14 per diluted share. This was a good result, given the challenging steel market conditions that prevailed throughout much of the year. Strong performance in many of our steel products businesses helped to partially offset the destocking, that negatively impacted our steelmaking operations. In particular, I'd like to recognize both Vulcraft and Verco and our Buildings group, which each achieved their most profitable year ever, as well as our rebar fabrication operations, which posted much improved results over 2018, reflecting both strong execution and favorable non-res construction market conditions. Thank you for this result.

We believe that inventory destocking concluded in the fourth quarter when customers resume more normal buying patterns. General business conditions also improved as the fourth quarter progressed due to a number of factors, including a rate cut by the Federal Reserve, the new labor agreement between the United Automobile Workers and GM, as well as progress on U.S.-China trade relations and the passage of the U.S., Mexico, Canada trade agreement by Congress. With regard to the USMCA, we applaud the House and Senate for passing the agreement with overwhelming bipartisan support. The new trade deal with Canada and Mexico is a significant win for the U.S. steel industry, especially given the revamp of rules of origin that will greatly incentivize the use of North American steel and autos, auto parts and other products containing steel. All in all, we sense noticeably more optimism about the outlook for the U.S. economy as we head into 2020.

I'd like now to share with you my most immediate priorities for our company, as I begin my tenure as Nucor's CEO. There are four key areas that we, as a leadership team, will focus on and execute on. First, we as a team, care for one another through the value of safety, to further strengthen our culture, which is a key driver of our success.

Secondly, the execution of the $3.5 billion of growth projects we are bringing online, execution begins with bringing these projects online safely and we've been doing that. Once they begin operating, we need to ensure that we stay focused on generating appropriate returns from these investments. All of these investments are focused on Nucor's goal of being the supplier of choice, both today and tomorrow. We are staying ahead of the curve in adding the high-value products that our customers are asking for.

Third, effective management of our portfolio of businesses to maximize our earnings potential. Ensuring our future success requires both making sound growth investments and addressing areas of underperformance. We will harness Nucor's culture of continuous improvement to achieve the full return potential across our entire asset base.

Finally, I've taken over the leadership of a company, whose ability to attract, retain and develop great people has always been key to our success. So, we will remain relentlessly focused on talent. Our team members create the true value in our company. We have more than a 90% retention rate and I believe we have the most engaged, passionate and driven team members in the world. We will continue to attract great team members by making sure the talent and passion of our team is more broadly recognized outside the company and we are committed to further enhancements of our programs to develop and retain our valuable team members. There will be more to come in all four of these areas as the year progresses, but I wanted to share these initial priorities with you today.

Let me conclude my prepared remarks this afternoon with an update on some of our more significant capital projects. We achieved important milestones on several of them during the quarter. At our DRI plant in Louisiana, the critical work of replacing the convection section of our process gas heater as well as realigning the reactor refractory was completed in November. The work was done safely, on time and within budget. We expect these projects will further improve the plant's reliability. My thanks and congratulations to the team in Louisiana for their successful execution on this key phase of Project 8000 and for their performance in 2019, which was our second best year ever for uptime and output, despite the 70-day planned outage.

Two of our growth projects, our specialty cold mill complex at Nucor Steel Arkansas and the new galvanizing line at Nucor Steel Gallatin continued to ramp up production during the fourth quarter. Feedback from our customers on the product set of Gallatin and Hickman has been excellent. And now that we're operating, we've seen even more opportunities to align with our customers.

Utilization at Gallatin's galvanizing line is already over 50% and Hickman's new cold mill is operating 24/7. We had contract customers for 31% of the new cold mill's capacity at year's end. Qualifications are ongoing and we expect to be IATF certified by mid 2020 at Hickman's new state-of-the-art reversing cold mill. Several other growth projects are coming online early in 2020 as well, including our new rebar micro mill in Sedalia, Missouri, the new merchant bar quality mill at Nucor Steel Kankakee and our JV galvanizing line located in Central Mexico that we are operating with JFE Steel of Japan.

We have arced both the EAF and LMF furnaces at Sedalia in recent days and our new teammates there are hitting the ground running. Already serving customers with product made from billets, we expect to ramp up to continue to go well. Kankakee experienced some delays in equipment deliveries in the permitting process, but we expect to come in at our initial capital budget of approximately $190 million. We expect to start shipping product during the second quarter.

At our joint venture with JFE in Mexico, we look forward to beginning trial shortly and serving our automotive customers in Central Mexico. The facility's opening has been delayed due to some challenges that we did not anticipate. For example, more difficult soil conditions required incremental piling, resulting in higher cost than budgeted. We also found that the local electrical system infrastructure was insufficient for our needs and decided to acquire additional land for our operational footprint.

These events increased the total capital budget from our initial estimate of $270 million to approximately $360 million with Nucor's share of these amounts being 50%. While this is disappointing, JFE and Nucor will remain very excited about the JV's prospects and are very confident in the product and our partnership. This is especially so, following the recent passage of the USMCA with its North American content rules.

Finally, we are excited to report that we have teammates on the ground and have begun excavation work for our new plate mill in Brandenburg, Kentucky. The mill is the largest investment in our company's history. And when it begins to operate in 2022, Nucor Steel Brandenburg will be able to produce 97% of the plate products demanded in the United States market.

With that, let me turn it over now to Jim Frias, who will discuss our financial results in greater detail.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Thanks, Leon. Nucor reported fourth quarter of 2019 earnings of $0.35 per diluted share. Included in these results were non-cash impairment charges of $66.9 million or $0.17 per diluted share. Of that amount, $35 million or $0.09 per share related to our natural gas well assets, $20 million or $0.05 per diluted share related to a long-lived asset impairment in the steel mills segment and $11.9 million or $0.03 per share related to the writedown of certain intangible assets in the steel product segment. These results exceeded our fourth quarter of 2019 guidance range of $0.25 to $0.30 per share. The amounts of these non-cash impairment charges were not included at the time we issued our guidance on December 12.

Our fourth quarter included better-than-expected performance across most of the steel mills segment. Our fourth quarter results included approximately $35 million or $0.09 per diluted share, a pre-operating and start-up costs related to strategic investment projects. That compares to approximately $28 million in the third quarter of 2019 and approximately $17 million in the year-ago quarter. Excluding profits attributable to non-controlling interests, the effective tax rate was approximately 24.5% for the full year. Going forward, we expect Nucor's effective tax rate to continue to be in the range of 24% to 25%, barring any unusual items.

In 2019's challenging steel market conditions, Nucor generated record operating cash flow of approximately $2.8 billion. Capital expenditures for 2019 totaled approximately $1.5 billion. For 2020, we expect capital spending to exceed $2 billion. Major components of this year's capital budget include the Brandenburg greenfield plate mill, the Gallatin sheet mill's hot band production capacity expansion, the Hickman sheet mill's new galvanizing line and our Florida rebar micro mill.

In addition to investing for long-term profitable growth, Nucor's disciplined and balanced approach to capital allocation rewards our shareholders with attractive cash returns. Cash return to shareholders during 2019 totaled $791 million or 62% of net income for the year. We paid dividends of $492 million. We also repurchased approximately $299 million of our stock, about 5.3 million shares at an average cost of just over $56 per share. With the dividend increase announced in December, Nucor has increased its base dividend for 47 consecutive years, every year since it first began paying dividends in 1973. Over the 10-year period ending in 2019, Nucor has returned a total of more than $6 billion to our shareholders through dividends and share repurchases.

Our focus continues to be unaffected stewardship of our shareholders' valuable capital via both disciplined investments that we expect will generate returns, well in excess of our cost of capital as well as attractive cash returns to our shareholders. Nucor's financial condition remains strong. We ended 2019 with $1.8 billion in cash and short-term investments. With total debt outstanding of approximately $4.3 billion, our gross debt-to-capital ratio was 29% at the end of the fourth quarter. Our $1.5 billion unsecured revolving credit facility remains undrawn and does not mature until April of 2023. Our next significant debt maturity is in 2022 for approximately $600 million.

Now turning to the outlook. Nucor's earnings in the first quarter of 2020 are expected to increase as compared to the fourth quarter of 2019. We are encouraged by improving conditions in the U.S. steel markets entering 2020. We believe this reflects the end of the severe inventory destocking that occurred last year and ongoing modest growth in end-use markets overall. We expect first quarter earnings in the steel mills segment to increase from the fourth quarter due to price increases and expected higher volumes.

It is worth noting that December, a historically weak month, was the highest profit month in the fourth quarter for our steel mills segment. The profitability of the steel product segment is expected to decrease as compared to the fourth quarter, due to normal seasonality. The performance of the raw material segment is expected to increase compared to the fourth quarter, due to improved pricing for raw materials. It's worth noting the outlook from an end-use markets perspective. We see stable or growing end-use markets, accounting for approximately 70% of our shipments.

Leon mentioned the strength of non-residential construction markets. We see this continuing into 2020. Non-residential is an important demand driver for our industry. Boat's order rates and backlogs are up across our Buildings group and in our joist and deck business. We are also hearing similar things from our structural fabrication customers. Nucor is the leading supplier of structural beams in the U.S., with the broadest product offering. It's a privilege to support our fabricated customers and important projects across the country.

Thank you for your interest in Nucor. I will now turn the call back over to Leon.

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Jim. At this time, we're now ready to take your questions.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] And we'll take our first question from the line of Martin Englert with Jefferies. Please go ahead.

Martin Englert -- Jefferies -- Analyst

Hi. Good afternoon, everyone.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon, Martin.

Martin Englert -- Jefferies -- Analyst

So, you provided some commentary on the demand front and maybe if you could frame up what your expectations are for U.S. steel demand in 2020 versus last year, talking about some of the puts and takes among the end market? And then, also, based on the activity that you're seeing today in the order books, what is the sequential change might you be expecting within steel volumes in first quarter here?

Leon J. Topalian -- President and Chief Executive Officer

Okay. Martin, let me begin first by stating how humbled and excited I am to be leading the Nucor team. I stand shoulder to shoulder with the greatest manufacturing team assembled anywhere in the world. And i'm surrounded with the most experienced executive team in the industry. And so, as I mentioned in the opening comments, we do see 2020 being a -- shaping up to be a better year than 2019. Non-res construction is strong. We believe destocking has really been completed, we've seen some of the restocking, but as we talk about order entry rates, there is a marked improvement in Q4, we see that continuing. Our backlogs are strong, as Jim mentioned in his comments. The fabrication community, their backlogs are very strong into 2020. So, we see the outlook is fairly optimistic as we move into 2020.

Martin Englert -- Jefferies -- Analyst

Okay. And then, how -- sorry, go ahead.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Yeah, the second question was about the volumes we're anticipating in Q1 and we don't give that specific guidance, but I'll say qualitatively, especially regarding our sheet business, we've had 15 straight weeks, where order significantly exceeded -- I'd say significantly, but more than 10% exceeded our production capacity and so we've built our backlog by about two weeks since the end of September, so about two weeks longer.

So, we're going to run the sheet business at least near full for the first quarter. The rest of our businesses have not really run full consistently for a number for a number of years, other than periodically once full, but we feel very confident sheet will run full. We're not going to give guidance about volume overall other than to maybe give that data point. I think, it's also worth noting that last week, the third week of January, was one of the strongest weeks of order input we've seen in sheet since the improvements began in mid-October.

Martin Englert -- Jefferies -- Analyst

It sounds like a stronger start, maybe, on a sequential basis than what we've seen in the couple of past few years, though, based on your commentary?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

The only -- maybe than last year. The year before that, it's going to be hard to beat. It has a pretty strong first quarter pick up in 2018.

Martin Englert -- Jefferies -- Analyst

Okay, understood. And if I could one more, with growth capex increasing, could you touch on any need to draw on the revolver, perhaps, increase other debt to support the growth initiatives? And also, remind us of minimum cash balances and leverage targets for the Company?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Sure. So, we're starting the year with a very strong liquidity position, $1.8 billion in cash and short-term investments. And so, we're going to have peak capex over the next two years and then it should taper off based on the projects we've announced and have in our pipeline actively today. And so, we could be slightly cash flow negative over the next two years. And then -- but over the next five years, we would expect to be strong cash flow positive. So, right now, we would not expect to draw on the revolver. We would be more likely to issue CP if we got to that point, but with the $1.8 billion cushion, I don't see that likely this year.

Martin Englert -- Jefferies -- Analyst

Okay. So rather other debt forms as opposed to the revolver if needed, but you don't anticipate that at this point?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

That's correct.

Martin Englert -- Jefferies -- Analyst

Okay. [Speech Overlap].

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

And again, we need about $400 million to $500 million [Phonetic] liquid cash. You asked that question, I didn't answer that part, just to sort of support the liquidity in the business.

Martin Englert -- Jefferies -- Analyst

Okay, thanks for all the detail there and congratulations for a strong finish for the year.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Thank you.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, Martin.

Operator

Thank you. Our next question comes from Chris Terry with Deutsche Bank. Please go ahead.

Chris Terry -- Deutsche Bank -- Analyst

Hi, Leon and Jim, and congrats on the new role, Leon. A question I wanted to dig into a little bit more was on capex. You touched on that last question, but just a few more specifics, if I may. So, you said, I think, $2 billion around that level for 2020. You said $3.5 billion for your total projects. So, from the calculation we've done, we still got about $2.3 billion of that $3.5 billion still to spend. Can you maybe just give us some color on how we'll -- how 2021 will shape up as you go through the numbers and maybe after you've done these expansions, what the sustaining level would look like? Thank you.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Yeah. Our maintenance capex, we think of as being in the range of $500 million per year, as that's embedded in that more than $2 billion that we expect to spend in 2020. It's too early to say for '21, but I think '21 would be similar in levels to '20, both years would be in the neighborhood of $2 billion or just north of there and then, it'd be a fairly significant drop-off relative to the things that we've committed to get this point in time. We could, of course, identify other projects between now and then that would increase that. And the other thing is, each year, as part of year-end process, we've put up some slides that give color to our capex spending items and we will be putting those up today after the call on our website for investors to see.

Chris Terry -- Deutsche Bank -- Analyst

Okay, thanks for that. And that includes the -- what's the additional spending for the paint line that you announced in December. I assume that's around the $100 million level or something in that ballpark?

Leon J. Topalian -- President and Chief Executive Officer

Yeah, Chris, as we -- and we're very excited about the announcement of our paint line and we're broadening our downstream offering to our customers. We've not released that number. As we're getting into the -- kind of completing the engineering review, as we get that finalized, we'll announce that to you and ensure that we do in the coming weeks.

Chris Terry -- Deutsche Bank -- Analyst

Okay, thanks for that. So, just to reiterate from the first question, so, you said through the next couple of years, you're comfortable funding the dividend and maintaining the business out till the capex drops off, you're comfortable managing sort of the capital management part of the business, even though the capex will be elevated for those two years.

Leon J. Topalian -- President and Chief Executive Officer

That's correct, Chris.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Yeah, agreed.

Chris Terry -- Deutsche Bank -- Analyst

Okay. And the last one from me, just in terms of the new Missouri mill, just wondered if you could give a few more specifics on the ramp up of that. And then, just what you're seeing in the rebar market specifically? Thanks.

Leon J. Topalian -- President and Chief Executive Officer

We're very excited about the strategy behind the micro mills, and I'll ask Dave Sumoski here in a minute to maybe provide a little update on Sedalia specifically, but that investment strategy and our capital allocation philosophy to become and maintain the world-class position in rebar by serving those markets where our customers are at, a high propensity of the scrap, is critically important to us in maintaining that. Dave, anything you'd like to update there?

David A. Sumoski -- Executive Vice President Merchant and Rebar Products

Yeah. The only thing I'd add on that -- I mean, you hit it, but if you look at just the nameplates, it would indicate that we're adding about 700,000 tons of additional rebar, but there's more to our strategy than that. We have a very deliberate process to realign our product mix in the bar group and in another groups, but specifically, you're talking about the bar group. And this includes producing higher value products at some of our -- some of our other divisions and that process has begun. It's been thought for some period of time. And I'll just share a couple of examples -- Texas facility is now on pace to make about 150,000 tons of SBQ and our Darlington mill now makes about 300,000 tons of rod and when they add their degasser down there, it will move up the value chain even more on the rod market and they'll start producing more SBQ.

So we are shifting rebar from some of our divisions to these new locations, where it makes more sense. At the end of the day, we're going to move up the value chain, but we'll not abdicate, we will not abdicate markets and customers have been very good to us over the years. Specifically on the start-up, I am being told that we're going to melt the heat. We're going to go from melt shop all the way through the process on Thursday. We've already commissioned some of the proper -- some of the processes and we run some billets through the line and we shipped 700 tons out of there from other divisions, just so we can get our ERP system up and working. That's where we're at it.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, David. Does that address your question, Chris?

Chris Terry -- Deutsche Bank -- Analyst

Yeah, that's great. Thanks guys. That's it from me.

Leon J. Topalian -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Timna Tanners with Bank of America. Please go ahead.

Timna Tanners -- Bank of America -- Analyst

Hey, good afternoon. Happy new year, and Leon, I am looking forward to working with you.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon. How are you, Timna.

Timna Tanners -- Bank of America -- Analyst

All right, thanks. So, I just wanted to step back and ask a couple of high level questions, if I could. If we look at the steel products segment, profitability in 2019 is a step up from 2018. I am just trying to figure out how much if any of that was related to declining steel prices and how much might have been related to some of the growth projects? So if we look at 2020 for example, with 2018 under-earning and 2019 over-earning or should we consider it to being building from recent years?

Leon J. Topalian -- President and Chief Executive Officer

Yeah, let me start up and I'll frame it at the high level and maybe ask Chad Utermark or Jim to chime in. One of the areas, Tim, is that I mentioned in my opening comments was to really begin to look at how we scrutinize some of the businesses that we're not meeting our expectations. So one of the examples, I'll share with you is in our products group, and Chad and his teams have done an amazing job of rationalizing a market that for many years was about 2 million tons that shifted down over the last six or seven years to about 1.2 million tons. So we moved operations, combined different manufacturing plants and brands within the same plants and really brought the market needs to fit our supply framework. And by doing so, it's really created a very positive cash position. So I would say that impact is in the result of the team achieving a record year is largely based on those decisions that we made as opposed to just the declining steel prices, which did have some factor. But Chad, anything you'd like to add on that?

D. Chad Utermark -- Executive Vice President Fabricated Construction Products

Yeah, thanks Leon. Yeah, thanks Timna for recognizing that. Obviously, lower raw material costs, as well as the solid non-res construction market that we had, had an impact in a positive way to some of the record we set. But that record performance of the fabricated steel products segment is also benefiting from what Leon just talked about, this restructure in particular of our metal buildings business as well as rebar fabrication business. We're seeing the results, the restructure is resulting in a lower cost structure, some of the capital investments in new equipment changes to our process flow and the volume impact associated especially with metal building group, producing multiple brands at the same plant is really paying off. So we're excited, I think there is even further opportunity for us going forward for us to improve our performance downstream.

Leon J. Topalian -- President and Chief Executive Officer

Yes, the thing I'd add, Timna, is this. We took some of the rewards from the changes we've made to those businesses that Chad talked about metal buildings and rebar fabrication, but we expect to reap further rewards from those changes in 2020. And so we're optimistic that 2020 is likely to be a better year. The other thing I'd say is our tube business, which we built through three acquisitions a couple of years ago, didn't have its best year. They were much better in '18 than they were in '19. We expect that business to do better in '20 as well. So, we think 2020 should be a pretty decent year for us in steel products.

Timna Tanners -- Bank of America -- Analyst

Okay, super. And then I kind of want to ask the same questions about raw materials and long products, because 2018 is a really good year, 2019 was a not-so-good year in all those categories and especially for raw materials, there's been so much fluctuation like how should we think about "normal" EBITDA per ton or margin per ton or however you want to think about it? And same question for volumes in the long products like they fell off in 2019 and so trying to think about how some of these expansions or enhancements can result in better 2020? Thanks for that.

Leon J. Topalian -- President and Chief Executive Officer

Okay. Again, so I got the raw materials and the long products, and again. I'll maybe ask Craig to chime in here. But at the end of the day, the longs business for us is a very profitable sector of our business. Market leadership in beams allows us to operate in the roughly 65% to 70% range through most of '18. But again, as we talked about in sheet, and Jim mentioned, specifically both plate and beams, we've also seen a market shift in order entries and backlogs. And so we're seeing that market improve from '19. Again, I think a factor of that is the destocking that took place throughout 2019.

And as we move into 2020, I think you'll see a much more level in tempered business conditions as we move through whether it's scrap or order entry rates. We believe we will be more stabilized as we hit '20. I think '18, we saw our customers overbuying demand. In '19, we saw them under-buying, I think you'll see that more balance.

But Craig, maybe you'd add some color on the raw materials.

Craig A. Feldman -- Executive Vice President Raw Materials

Sure. Thank you, Leon. Yes, Timna, no doubt about it. The margin compression we talked about on prior calls, particularly the DRI plants has been real, it's on both sides. It's on the supply side, and of course, our selling prices were challenged in 2019. Going forward, we really don't share EBITDA per ton numbers in that regard in the raw materials group for VRI, what I would just characterize that this a lot of the heavy lifts that we have done over the last year or so, and we have highlighted Project 8,000, a number of times on the call, and the improvements that we made really focused on reliability going forward.

So by the middle of the year, I would say that we'll toward a more normalized run rate, I suspect that we will see some relief on the iron ore pricing standpoint as well. And we feel very good about the work that we have done related to capex and improving the reliability going forward. The team in Louisiana has moved from between 250 tons an hour close than 280 tons an hour, so we feel very good about the operational improvements that we have made there, and generally speaking, you don't know where markets will grow, but fairly positive outlook, once we get past the first half of this year.

David A. Sumoski -- Executive Vice President Merchant and Rebar Products

Yes, this is Dave. I just make one comment on the longs. If you're just looking at bars and the numbers there, two different businesses, so you got the SPG product and then you get a rebar in the MBQ product. And on the rebar and MBQ product, '18 was a great year, but we are tracking ahead of 2017. So, if you look at that year on the pure bar side. So that industry or that business is supported by the construction industry and that is why we still feel there is a strong construction market out there moving forward.

Picking on engineered bar, excuse me, engineered bar kind of lives in our view in a different ecosystem. We don't really sell into the construction market. A couple of our major markets, oil and gas and ag equipment, we are actually down, we have to combine factors of destocking with both OEMs in service centers. So, despite that our engineered bar group, special bar quality picked up share in 2020 -- in 2019, excuse me. So, again, not construction related, but a different market situation. So, excuse me, Timna, continue your point, please.

Timna Tanners -- Bank of America -- Analyst

Oh, no, not at all. I just trying to make sure I understood. So it sounds like 2018 tough comp versus 2019 you expect, not the same destocking, better volumes and then sprinkle in some organic improvements, and that is how we should be thinking about 2020?

Leon J. Topalian -- President and Chief Executive Officer

Yes, it is. I think underlying demands is there. I think it is stable and some of the sectors that Dave and both where I mentioned, construction in particular was strong and we're seeing some slight improvements year-over-year.

Timna Tanners -- Bank of America -- Analyst

Great, thank you.

Operator

Thank you. Our next question comes from Curt Woodworth with Credit Suisse. Please go ahead.

Curt Woodworth -- Credit Suisse -- Analyst

Yes, good afternoon. I guess my first question, I guess, I mean Nucor has had a pretty consistent operating philosophy for a long time, that seems like the company has definitely sort of accelerated more of the build for spot mentality with a lot of capex. So, I'm just curious with new leadership that are coming, this new perspective, new opportunities. What do you see kind of changing at Nucor? Where do you think the most opportunity for improvement lies? And how do you think your -- maybe near-term agenda will be different from prior attendance? It is my first question.

Leon J. Topalian -- President and Chief Executive Officer

Okay, Curt, I would frame it up this way. It is not easier for me to talk about those things that are not going to change. Our focus on our core, our culture is going to remain very much intact. How we care for our 27,000 men and women of the Nucor family is critically important. They are the value generators for our future. The $3.5 billion of investment projects we have slated are equipment or things that can be bought. Our team is what revolutionizes and changes the market and the returns that they are able to achieve. And so I couldn't be prouder of our team and we are laser focused after the value of safety curve on executing on that $3.5 billion. It is the second focus for our entire organization and we bring those projects in safely on time and ahead of schedule. And so that is where our focus is at.

And then third, we move to really the portfolio management. How do we continue to think about growth in the short and medium term and long-term, and then coupling that with how do we scrutinize those businesses that have not returned the levels of profits and shareholder returns, we have come to expect of ourselves and the investors have come to expect of us.

So, based on those focus, I would tell you that there is not a shift in what -- how John led or Dan DiMicco led. What I would tell you is the destinations are very similar. The routes we may take to get there might be slightly different than the all of us use ways or Google Maps to get into the city. I may go to New York City five different ways, five days in a row. But how I communicate or the things that we do to achieve the result, the results are focused on the safety of our team and executing really well on the valuable shareholder capital that they entrust us with every day.

Curt Woodworth -- Credit Suisse -- Analyst

Okay, that makes sense. And then I guess, with respect to capital bending and sort of dating myself a little bit here, but if I look at your plate capacity since 2005, it is been pretty consistent around 2.8 million tons and your 15-year utilization rate has been about 80%, and you were at roughly 70% for last two quarters. So I'm wondering, tactically, if we get into a demand situation where the plate stays -- demand stays week, would you contemplate postponing plate mill capex?

Leon J. Topalian -- President and Chief Executive Officer

Let me begin with the short answer, no, is the short answer. The longer answer is, we have been in this business now for 20 years, Curt. We understand the markets that we serve, we understand the customer base that is asking for this. And this is something that we contemplated since going back in 2008. So, our focus is for the long term. We understand there is going to be ebbs and flows in the markets. It is a cyclical business, and it is a business we know well, and we have been in and a part for over 50 years.

So as we think about plate, the only side of the fact that we will have the most diverse product offering of any mill in one location located in the heart of the largest plates consumable region, the United States. And so by doing so, we really believe we have a differentiated value proposition to offer our customer base that puts us in a low cost position, a market leadership position. And I'm incredibly encouraged by what Mary Emily and Johnny Vegas and the team at Brandenburg willing and be able to do in our future in plates.

Curt Woodworth -- Credit Suisse -- Analyst

Great, thanks. And best of luck in the future.

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Curt.

Operator

Thank you. We will next go to Andrew Cosgrove with Bloomberg Intelligence. Please go ahead.

Andrew Cosgrove -- Bloomberg Intelligence -- Analyst

Hi, thanks for taking my question. To start off and see if you could shed some light on the non-residential exposure by product on your sheet, bar, plate and structural, if that's helpful?

Leon J. Topalian -- President and Chief Executive Officer

Give me a little more color. I'm trying to follow your question.

Andrew Cosgrove -- Bloomberg Intelligence -- Analyst

I'm just trying to square up just the exposure to whether sheet, bar, plate, and structural in the non-res segment. I mean, the only reason why I asked is, because just trying to make sense of, I mean long products and I mean all lines are down pretty precipitously in 2019, non-res construction was up low single digits, I understand there were some destocking, but I guess, I'm just trying to see it non-res is still going to be strong and we are not going to get destocking and we will probably get restocking this year, where that might be felt the most?

Leon J. Topalian -- President and Chief Executive Officer

Look, I would tell you certainly, I think in a rebar, rebar fabrication businesses that are heavily put into the construction market and certainly some of the structural capacity that we have is a big part of that. And then the downstream products and building and -- are all factors in non-res construction. So that is the biggest side of the markets, we serve roughly about 30% of our overall products move into that space.

But one of the things you mentioned, I would maybe characterize a little bit differently. We think some of the restocking is already occurred. And again, as we mentioned earlier in our comments, I do believe you will see a more balanced approach to 2020 in terms of both service internally and buying patterns. And so, we do believe demand is healthy and we are optimistic too as we head into '20.

Dave, is there something you would like to add?

David A. Sumoski -- Executive Vice President Merchant and Rebar Products

Yes. I would just add that although there is no federal infrastructure bill out there, the states are really stepping up to the plate and they are doing a lot of work. So that is really going to boost in the non-residential construction markets. So, I just wanted to add that.

Andrew Cosgrove -- Bloomberg Intelligence -- Analyst

Okay. Perfect, thank you. And then I guess one on plate, I mean plate import last year were down 20-ish percent and then obviously the plate shipments were also down 12%. I guess, I was just trying to again that also just down to destocking or is there, I guess maybe if you could give some color on specific end markets where there was some weakness in plate specifically and maybe how you kind of see them shaping up right now?

Leon J. Topalian -- President and Chief Executive Officer

Well, look I will start it and maybe you can chime in if there is anything else. But as we think about the plate and the import levels, I would tell you one of the most impactful things is what we been able to do over the last couple of years. We won 12 trade cases since 2016 in plate, that has dramatically shifted the import coming into this country.

Certainly, 232 has helped, however, it is the long-term of the trade cases that we've won and something over 160 cases that we have won, some dating back in plates in 1999. So, our position through the long-term ICC and the Department of Commerce and commandment for what they have done and are doing. But that site has got to remain very vigilant. And so, that is a big part of why you saw the drop off in plate imports.

MaryEmily, anything you'd like to add on?

MaryEmily Slate -- Executive Vice President Plate, Structural and Tubular Products

Just a little bit color on that. You are right. We had the lowest level of imports in the last five years, last year which was great. And we do believe the overall market retracted, but mainly that was due to destocking activity. And we mentioned trade cases, there are still 17 active trade cases going on. So for 2020, we really look for the activity to be consistent. We feel like we are looking at a decent 2020 going forward. Thank you.

Andrew Cosgrove -- Bloomberg Intelligence -- Analyst

Okay, great. Thanks so much and best of luck this year.

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Andrew.

Operator

Thank you. We will next go to Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Hey, good afternoon.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon, Phil.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Welcome to the helm Leon, congratulations.

Leon J. Topalian -- President and Chief Executive Officer

Thank you very much. Very excited and very humble.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

In terms of the rebar color, it sound like, you are just getting the Missouri mill started in the last week or two. What is your thought around the ramp timeline there? And then, can you give us any color on the Florida mill as well, because I know that was something that was supposed to be around mid-2020?

Leon J. Topalian -- President and Chief Executive Officer

Certainly. On a high level thought, what I would tell you Phil is, the Micro mill in Sedalia is coming online as we speak to team, it has done a great job and taken care of the team from safety perspective, operating costing and schedule. So, we are excited about that. And then, in the micro mill in Frostproof, Florida, is still slated to come online in summer of this year.

So, the other part of that, maybe I will ask Jim to frame some color, because we do think about how are these investments returning and what is that long-term outlook, maybe Jim, you could add some color to those projects.

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

First of all, specific to your question, I think it is likely that Sedalia reaches breakeven sometime in Q2. And overall, the galv line at Gallatin is already making the positive contribution. We have pre-operating start-up costs in the quarter, I think it was $36 million in the fourth quarter, that is going to come down slightly in Q1, because some of these projects are starting to ramp. The Hickman cold mill is starting to ramp. So, their pre-operating start-up costs come down as they go toward breakeven. Sedalia is going to start to have its pre-operating start-up costs and come down as they strive toward breakeven.

Now, later in the year, we will probably have other projects increase the pace of pre-operating start-up costs. But, the projects that are coming online right now and that includes the galv line at Gallatin, the Hickman cold mill, the Sedalia bar mill and the Kankakee merchant bar mill. Those four are going to make a nice contribution to Nucor by the end of this year and a really good contribution to Nucor next year. And we get in the broader numbers that the cumulative projects have $600 million of EBITDA value. I would just say, if you do the math on the capex of those projects, you'll see a nice jump and that EBITDA is going to benefit Nucor in '21, and we will start to see some of that fruit by the end of this year.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

At a high level, Jim, the start-up costs, saying they're coming down a little bit sequentially here in the first quarter, but you are expecting the pre-operating start-up costs in total to be lower in '20 than the '19 or is that not a fair statement?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

No, I would say it is too early to say because we got two big projects getting ramped, and because they are bigger, they will have bigger pre-operating start-up costs. So, the expansion of capacity at Gallatin and the Brandenburg mill, when they come on, it's going to probably greatly increase our pre-operating start-up costs for a period of time. And we don't forecast that out more than one quarter at a time, so I can't tell you what those numbers are. Other than Q1, it probably going to be slightly down. But I would expect for the year, it might actually be slightly up because of those two bigger projects starting to ramp up the costs.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Okay. Fair enough. And then, the comment I think you made Jim on being cash flow negative for the next couple of years given the capex, are you throwing in the dividend in that discussion, meaning you are including the dividend in terms of that you are being cash flow negative?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

Yes. Dividend plus capex against operating, or cash from operations.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Okay. So, you are not saying free cash flow negative, you are just saying after dividend or are we seeing free cash flow negative?

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

I'm saying after capex and dividends.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Okay. And then lastly, just in terms of first quarter, so we are thinking about this right. Seemingly some operating leverage at least in the sheet division from better volumes in Q1, but overall as we look at the steel business, should we think that realizing metal spreads will be a positive contributor versus the fourth quarter?

Leon J. Topalian -- President and Chief Executive Officer

Yes, I think so, Phil. And again, as we look at scrapping, and obviously an awful lot of discussions. Craig, may want to add some color here, but the market demand standpoint is still strong. And I think one of the drivers that is not discussed an awful lot as we look at scrap, it is really the export market and the demand outside of the U.S. It has an impact on those.

So, Craig, anything do you want to add on the raw material stuff side?

Craig A. Feldman -- Executive Vice President Raw Materials

Yes, just in general, I would say that there was a lot of commentary around the interest in the spare market as it looks -- I think the key drivers is fuel demand and to Leon's comments and the rest of the teams, I think you would hear a fair amount of optimism here. And that is what we are seeing, we are seeing the domestic demand for scrap is relatively strong. So, absent the normal gyrations in the market, I would say, can we see a fairly relatively stable place environment, and again, driven by the steel demand, underlying steel demand.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Thanks so much. That's a lot.

Leon J. Topalian -- President and Chief Executive Officer

Phil, just one point I want to clarify, I made the statement earlier that Frostproof was expected to come online this summer. We will start commissioning, but it will really come online in Q4 of this year.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Perfect. Thanks very much.

Operator

Thank you. We'll next move to Alex Hacking with Citi. Please go ahead.

Alex Hacking -- Citigroup -- Analyst

Good afternoon, and let me add my congratulations Leon on the new role. I just have one question. Jim, I just have a follow-up on the capex guidance really just to make sure I was straight, I think you said 2021, you would be $2 billion-ish similar to 2020. If we take out $500 million a year for sustaining, that is about $3 billion on growth projects for the next two years. I guess that seems a little high compared to what we were thinking. We were thinking total budget of around $3.5 billion, with about $2.5 billion left to spend. I mean, I guess, can you help me pull that gap a little bit? I know you mentioned that...

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

There are some projects that aren't big enough that we forced to call out that are embed in there as well, there are improvement projects that we don't think of as being capex, but they are not building new mill type projects, so we don't call them out. So, there is some other capex in there for things that are improvement projects as well.

Alex Hacking -- Citigroup -- Analyst

Okay, it makes sense. Thank you.

Operator

Thank you. And it does appear we have no further questions at this time. I would like to turn the conference back over to Mr. Leon Topalian for any additional or closing remarks.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, Derek. Before concluding our call today, I want to express our appreciation to our shareholders. We value your investment in our company. We take the obligation seriously that comes with it. And we will treat your investment with great care. I also want to thank our customers. We are excited about the capabilities we are building to better serve you today and most importantly for tomorrow.

Thank you for your trust and confidence that you place in the Nucor team each day to supply your needs. We look forward to building powerful partnerships to generate powerful results. And to our Nucor team, thank you for what you are doing for Nucor and our customers everybody, and most importantly, thank you for doing it safely. We are committed to strengthening this core value and by doing so help to improve the safety of our Nucor family and our industry. I'm excited for Nucor's future and for all of us working together to expanding beyond take Nucor to new highs. Thank you to everyone on the call for your interest in Nucor, and have a great day.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Leon J. Topalian -- President and Chief Executive Officer

James D. Frias -- Chief Financial Officer, Treasurer & Executive Vice President

David A. Sumoski -- Executive Vice President Merchant and Rebar Products

D. Chad Utermark -- Executive Vice President Fabricated Construction Products

Craig A. Feldman -- Executive Vice President Raw Materials

MaryEmily Slate -- Executive Vice President Plate, Structural and Tubular Products

Martin Englert -- Jefferies -- Analyst

Chris Terry -- Deutsche Bank -- Analyst

Timna Tanners -- Bank of America -- Analyst

Curt Woodworth -- Credit Suisse -- Analyst

Andrew Cosgrove -- Bloomberg Intelligence -- Analyst

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Alex Hacking -- Citigroup -- Analyst

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